Class Action Progresses Over Refundable Deposits at Retirement Community

A Superior Court judge in Middlesex County, New Jersey, has given a green light to a class action suit claiming an operator of retirement communities deceived residents about its refund policy.

Judge Ana Viscomi denied a motion for partial summary judgment by Springpoint Senior Living, an operator of continuing care retirement communities, in a suit on behalf of current and former residents at five of the company’s properties.

In denying the Princeton, New Jersey-based operator’s bid to dismiss portions of the suit, Viscomi said the New Jersey Consumer Fraud Act provides for refunds of entry fees paid by class members who died or moved out of the company’s communities. She rejected Springpoint’s assertion that only the state Department of Health has the right to file a suit to obtain a refund of nursing home entry fees.

Springpoint’s lawyers asserted that the right to a refund under the CFA only applies to a portion of the statute called the Truth in Menu Act, which concerns alleged misrepresentations of the identity of food products to patrons of any restaurant, hotel or lunch counter. That part of the statute only applies to disputes about food, the defendants claimed.

Christopher M. Placitella of Cohen, Placitella & Roth. Courtesy photo

However, to support their argument, the defendants cited several unpublished cases that are “of no moment to this court.”

Meanwhile, the plaintiffs took the position that individuals have the right to bring suits for nonpayment of a refund of entry fees for continuing care retirement communities, Viscomi said.

And the plaintiffs cited published cases, including Lemelledo v. Beneficial Corp. of America, a 1997 New Jersey Supreme Court case, which said “language of the Consumer Fraud Act evinces a clear legislative intent that its provisions be applied broadly in order to accomplish its remedial purpose, namely to root out consumer fraud,” Viscomi said.

The judge also referenced another case cited by the plaintiffs, Weinberg v. Sprint, a 2002 case from the state Supreme Court that says the CFA “focuses on allowing individual consumers to recover refunds for losses caused by violations of the act.”

Years of Litigation

The suit was filed in 2013 on behalf of five retirement communities in New Jersey—Springpoint at Monroe Village, Springpoint at Montgomery, Springpoint at Crestwood, Springpoint at Meadow Lakes and Springpoint at the Atrium.

The plaintiffs claim Springpoint’s advertising and statements by its representatives, which promised that entrance fees would be 90% refundable for residents who chose the refundable deposit plan, were materially misleading because they omitted reference to language in the agreements providing that refunds would be based on the lesser of the resident’s entrance fee or the fee paid by a subsequent resident who took over the initial resident’s apartment.

Lead plaintiff William DeSimone claimed his mother paid a $159,000 entrance fee when she moved into a Springpoint facility in 2009, but after his mother died in 2010, the refund was roughly $80,000, or 50% of the entrance fee. He claimed in court papers that the community marketed itself in a confusing and aggressive manner, and that its 90% refunds were diminished when the company responded to market conditions by offering discounts to subsequent residents.

Viscomi granted class certification on March 18.

The case was dismissed in 2014 for failure to state a claim on which relief can be granted, but the Appellate Division reinstated the case.

The motion judge dismissed the case on finding that the plaintiff failed to plead that his family had actually seen the allegedly misleading advertising. The appeals court, in reversing the lower court ruling, said that if Springpoint’s staff or its brochures misrepresented the terms of the contract by failing to disclose that the entrance fee was subject to market trends, the plaintiff might be able to prove its causes of action, including the CFA.

Christopher Placitella of Cohen, Placitella & Roth in Red Bank, representing the plaintiffs and the class, said in an email about Viscomi’s decision: “Plaintiff appreciates the court’s ruling clarifying that refunds are available under the New Jersey Consumer Fraud Act. As the ruling greatly simplifies the calculation of damages due to the class here, we look forward to completing discovery and trial in the near future.”

Morgan Lewis represents Springpoint along with Clark Michie of Princeton. That firm’s Christopher Michie said in an email, “We respectfully disagree with the ruling.  As the Appellate Division and other trial courts have found in several unpublished opinions, the statutory language and the legislative history show that this provision was passed as part of the Truth in Menu Act in 1980 and was intended to apply only to misrepresentations involving food products.  The trial court acknowledged those authorities, but considered itself bound by some unfortunate dicta in Supreme Court decisions addressing other issues.  We hope that the Appellate Division will take the opportunity to clarify the law.”